The overall vacancy rate in the industrial sector dropped by only 0.4% year-over-year, leaving the rate relatively flat over the last four quarters.
This was partially due to vacancy in the warehouse/distribution category being unchanged over the last two quarters. After seeing significant drops in its rate in 2021, falling between 1% to 3% year-over-year, the category is now leveling out. This could be due to the sector’s vacancy rate having little room to move, ending the third quarter at 2.8%.
The Salem submarket has the highest vacancy rate in the warehouse/distribution sector out of all the submarkets tracked. Over the last year, the rate fell by 4.1% and ended the quarter at 7.9%. The shift was caused by multiple tenants coming to the submarket this year including:
- Didax, an education supply distributor, leased 52,750 SF at 144-146 Main Street in Plaistow during the third quarter.
- Bradford & Bigelow, a book publishing company, leased the entire 102,500 SF facility at 1 Puzzle Lane in Newton during second quarter.
- Munters Corporation, an international supplier of climate equipment, leased the newly built 30,000 SF at 9B Puzzle Lane in Newton during the second quarter.
With the vacancy rate remaining historically low, rents have continued to climb in the warehouse/distribution category. To close the third quarter, average asking rent was $11.10 NNN, higher than manufacturing and flex/R&D sectors. The rate spiked by 26.7% year-over-year, a record high increase.
Specifically, in two of the submarkets - Manchester and Salem - rents rose by over $4.00 PSF. The 38.6% rental increase in the Salem submarket was due to space being leased over the quarter that was listed significantly below the submarket’s average, leaving only two availabilities with higher rates.
However, the 54.4% rise in the Manchester submarket was due to new availabilities hitting the market at above average asking rates.
Over the third quarter, sale activity in the warehouse/distribution category not only increased year-over-year, but the average sale price PSF also climbed. Including a mix of investors and owner-user buyers, the sale price surged by 27.4% since last year with an average price $123 PSF.
Focusing only on investment sales, the average sale price climbed to $136 PSF. The majority of the investment groups buying properties are MA-based and growing their NH portfolio.
One of the only sales not purchased by a MA-based investor was the most expensive sale this quarter. A TX-based investment group purchased it first NH property with the recently fully leased building at 1 Puzzle Lane in Newton. After the new tenant signed a long term lease, the building was purchased for $207 PSF.
While investment sales have been plentiful, moving forward, will investors continue to be attracted to NH properties as interest rates climb? The simple answer is it depends on if the buyers need financing options. If buyers need financing, It may delay some in buying property, or it may lead others to move quickly and lock in rates before they rise. It may also lead to lower valuations.
At Colliers , we internally track over 71.2 million SF of industrial space across 6 submarkets in New Hampshire. Our inventory includes buildings and condominiums 10,000+ SF and are classified as manufacturing (Mfg), flex/R&D, or warehouse/distribution (W/D).
